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Studer v. Securities & Exchange Commission
Citation: 260 F. App'x 342Docket: No. 04-6646-ag
Court: Court of Appeals for the Second Circuit; January 14, 2008; Federal Appellate Court
Michael T. Studer, representing himself, seeks a review of the SEC's November 30, 2004 order imposing sanctions against him and barring him from associating with the National Association of Securities Dealers (NASD). The court's review is governed by the Administrative Procedure Act, requiring affirmation of the SEC’s factual findings if supported by substantial evidence. The SEC's order was not deemed arbitrary or capricious. Studer argued that the SEC erred in finding that he improperly induced a customer to sign margin guarantees, which would allow increased trading. The SEC clarified in its reconsideration that Studer was only liable for a failure to supervise trading, not for the guarantee violations. Consequently, the SEC's decision reiterated the NASD's findings and sanctions, penalizing Studer solely for his supervisory failures. Studer’s claim that he was penalized for "churning" the customer account was also rejected, as the SEC's final decision did not hold him liable for churning but rather confirmed his failure to supervise. The SEC acted within its authority to review NASD sanctions and determined that the penalties were not excessive given Studer’s prior violations, which he did not dispute. The petition for review was denied, affirming the SEC’s decision, which was found to be legally justified and factually supported. It was noted that the NASD is now known as the Financial Industry Regulatory Authority, Inc. Churning is defined as managing a client's account primarily to generate commissions, disregarding the client's interests.